Contributor, Benzinga
December 14, 2023

Trading forex vs Bitcoin sounds like a revolutionary profit-minting idea. While both investments are different in regards to how you look at money, you can build an understanding of trading for each one to create real buying power. It's important to understand how both forex and bitcoin work and what the pros and cons are for each.

This guide will help you develop a deeper understanding of forex vs bitcoin.

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What is Forex?

Foreign exchange or forex is when a currency like the U.S. dollar is converted into another country’s currency, such as the euro). As simple as it seems, the magnitude of the forex market is just mind-blowing — more than $5 trillion of currency changes hands daily in the 24-hour, 5 days per week foreign exchange market.

Governments, businesses and tourists all have diverse needs for foreign exchange, so they use foreign exchange markets or banks to convert their primary fiat currency into the type of money they want.

Trading forex is simply pairs trading. You buy 1 currency and sell another. For instance, if you buy the USD/EUR pair, you’re long the USD and short the euro. Other more actively traded currency pairs include GBP/USD, USD/JPY, USD/CAD, EUR/JPY and AUD/USD.

Pros and Cons of Forex

Forex may seem safer than currencies beholden on code, but you still need to understand what you’re getting yourself into. Here are some pros and cons that will help guide your decision.

Pros

  • Accessibility: The forex market is one of the most accessible markets for traders
  • Leverage: Access to leverage in forex can be the difference between small and sizeable gains
  • Easy short selling: Traders can easily sell one currency and buy another paired with it.
  • Liquidity: Being the largest market globally by volume, there’s ample liquidity.
  • Minimal price manipulation: The currency market isn’t easily influenced by insider information.

Cons

  • Volatility: Forex traders may be exposed to extreme volatility
  • Barriers to entry: The bulk of currency trading is largely done by banks, hedge funds and large financial institutions.
  • Fees: Trading currencies may attract high fees and costs depending on your broker.
  • Market shocks: Unexpected market and political events can shock the currency market.
  • Scams: The forex trading market is marred with frauds and scammers.

What is Bitcoin?

Bitcoin is a cryptocurrency developed by Satoshi Nakamoto, whose identity is still unknown to date. You can compare Bitcoin to an online version of cash. The physical bitcoins you’ve seen around in photos are a novelty — the crypto would be worthless without the private codes printed inside them.

Each Bitcoin transaction is recorded in a public list known as the blockchain. This makes it possible to track the history of bitcoins in order to stop people from making copies, spending coins they don’t own or undoing transactions. Digital wallets store private keys needed to authorize blockchain transactions.

Pros and Cons of Bitcoin

The thrill of riches from Bitcoin is both a draw and a worry. Consider these pros and cons before investing in this rapidly changing cryptocurrency market.

Pros

  • Security: Through blockchain technology, Bitcoin seeks to ensure transactions are recognized and stored on a public ledger.
  • No inflation risk: Bitcoin avoids the inflation risk since it’s supply is capped at $21 million.
  • Portfolio diversification: Bitcoin may provide a measure of diversification depending on your risk tolerance.
  • No 3rd parties: Bitcoin transactions are peer-to-peer on the blockchain.

Cons

  • Volatility: The Bitcoin price is based on demand and supply from investors, so prices can change dramatically.
  • Market manipulation: The lack of transparency leaves bitcoin susceptible to market manipulation.
  • Hacks: Blockchains aren’t impervious to malicious actors.
  • Minimal regulation: The Bitcoin market is largely unregulated — investor protection isn’t guaranteed.
  • Limited use: Bitcoin is yet to gain acceptance by most online merchants.

Trading Costs

Here is a break down of the trading costs for forex vs. bitcoin.

Forex

The cost to trade forex largely depends on your broker. For each trade you place, you’ll have to pay a certain amount in commissions or fees for each trade you place with your broker. Common forex trading costs include:

  • Rollover fee: The rollover fee is the interest your broker charges for holding positions overnight.
  • Currency conversion charges: You may incur a currency conversion charge if you forex trade in a currency other than your account’s base currency.
  • Inactivity fee: Your broker may charge an inactivity fee if no trading activity occurs in a given month.

Bitcoin

Cryptocurrency exchanges charge a trading fee when you buy or sell bitcoin. For instance, Coinbase charges about 0.50% for cryptocurrency purchases and sales. You can also expect to incur charges when performing a cryptocurrency conversion like Bitcoin to Ethereum. A good example is Coinbase which charges a spread margin of up to 2% for cryptocurrency conversion.

Other fees for trading Bitcoin include:

  • Maker fee: This is the fee you incur for placing a bitcoin order that doesn’t fulfill immediately.
  • Taker fee: The fee incurred for placing a bitcoin order that fulfills instantly.

Best Online Forex Brokers

There are a ton of online broker options to trade forex, but they may not all align with your trading strategy and goals. Your success in forex trading may boil down to the broker you choose. Here are some of our recommended brokerage platforms to trade forex.

  • securely through Forex.com's website
    securely through Forex.com's website
    Best For:
    Forex Trading in and Outside the U.S.
    Rating:
    Read Review

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

  • securely through eToro Forex's website
    securely through eToro Forex's website
    Best For:
    Demo Accounts
    Rating:
    Read Review

    CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • securely through AvaTrade's website
    securely through AvaTrade's website
    Best For:
    Non US Forex Trading
    Rating:
    Read Review
  • securely through HYCM Capital Markets's website
    securely through HYCM Capital Markets's website
    Best For:
    Forex Trading
    Rating:
    Read Review
  • Securely through Interactive Brokers’ website
    Securely through Interactive Brokers’ website
    Best For:
    Active and Global Traders
    Rating:
    Read Review
  • securely through IG Markets's website
    securely through IG Markets's website
    Best For:
    Forex Execution
    Rating:
    Read Review

    Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Best Online Bitcoin Brokers

Different online brokers carry different strengths — you must figure out the broker that best suits your bitcoin trading aspirations. Here’s a list of some of the popular and reputable options in the crypto market.

What’s Your Endgame?

The forex vs Bitcoin stalemate never seems to end, probably because both carry an intriguing risk-reward dynamic. 

If you’re looking to rack up quick profits from a largely speculative asset, then bitcoin may be a good play. But remember, both investing options are just as profitable as they are inherently risky. Be sure you understand each market before making an entry — and if you must speculate — only play around with money you can afford to lose.

Frequently Asked Questions

Q

Is forex better than Bitcoin?

A

Analyzing forex and bitcoin is the first step toward investing in the digital market, but is one better than the other? Well, it all comes down to your strategies, goals and needs. 

Sure, forex is considered more stable than Bitcoin, but Bitcoin can provide quicker and higher profits. You may also want to incorporate both for a more diversified portfolio.

Q

Is Bitcoin riskier than forex for trading?

A

Trading Bitcoin is riskier than investing in forex since Bitcoin is a largely unregulated currency that displays violent price moves, not forgetting its speculative nature. The caveat is that forex is a developed market where you’re squaring it out with a syndicate of hedge funds and large banks that can manipulate prices.

Either way, both markets carry risk. The way you mitigate those risks is what matters. Start by obtaining the relevant knowledge about both markets as well as understanding your risk appetite. 

Q

What's easier crypto or forex?

A

Because the forex market allows investors easier access than the crypto markt, some people believe it’s easier to get started.

Q

Which is more volatile crypto or forex?

A
Both crypto and forex markets are highly volatile, but crypto tends to be even more so due to its newness and lack of established regulation and market infrastructure. The crypto market is influenced by various factors, leading to significant price fluctuations. It is important to exercise caution when trading in both markets due to their inherent volatility.
Q

Forex and bitcoin, which one is more profitable?

A
Forex and bitcoin trading offer potential for profits, but their profitability depends on market conditions, trading strategies, and individual expertise. Forex trading involves currencies and offers a wide range of currency pairs, while bitcoin trading involves trading cryptocurrencies and is more volatile due to its decentralized nature. Profitability depends on factors such as market knowledge, risk management, and adaptation to market conditions. Thorough research is important before making investment and trading decisions.

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.